UK entrepreneurs are altering the way in which they money out of their companies, as financial uncertainty makes typical exit methods much less enticing, information finds.
A brand new report from Charles Stanley, developed with Beauhurst, reveals that extra founders are actually selecting to promote a part of their stake to buyers in a secondary transaction. This permits them to achieve some monetary return with out totally relinquishing management of the enterprise.
Specialists say the shift is being pushed by slower progress, excessive rates of interest, and a more durable funding local weather within the wake of the pandemic.
Exit quantity stays above pandemic ranges
Based on the complete Charles Stanley Exits within the UK report, exit exercise within the UK stays elevated above pre-pandemic ranges. Since 2015, 7,859 high-growth UK firms have exited, with virtually 40% of exercise occurring in simply the final two and a half years.
Predictably, acquisitions account for almost all of exits recorded up to now ten years. Peaking in 2021, a complete of 1,110 buyouts occurred as extra entrepreneurs offered up store.
Enterprise buying has since remained robust, nevertheless. 2024 noticed the second-highest variety of acquisitions throughout the interval, with 1,069.
Many of those have been splashed throughout the enterprise headlines this 12 months. Quick-growth startups snapped up in 2025 embody health app Runna, which was acquired by Strava in April, and the eco-conscious beauty model Wild, which was purchased by Unilever in March.
In each instances, the companies have been acquired by company consumers (firms making strategic purchases) slightly than by monetary consumers (buyers hoping to make a return). In 2024, 85.7% of acquisitions have been by corporates, whereas 14.3% have been carried out by buyers.
What’s a secondary transaction?
Acquisitions may rule the roost, however founder-led secondary transactions have develop into extra outstanding since 2015. Rising from 650, they peaked at 1,799 in 2022.
Secondary transactions usually are not technically an exit technique. They’re a liquidity occasion for each founders and buyers, and infrequently happen throughout later funding rounds, not simply at exit stage. However they’re like acquisitions in that they permit each events to money out.
On this technique, founders promote their shares in a non-public firm to a brand new investor, slightly than the corporate issuing new shares to boost cash.
This methodology permits founders (or early shareholders) to entry capital with out a full exit. Plus, as they solely lose a part of their stake, the founder can nonetheless retain management over the corporate. This could possibly be why secondary transactions are more and more seen as an alternative choice to full exits.
Cliadhna Regulation, Head of Direct & Skilled Gross sales at Charles Stanley, feedback: “Exits are not confined to an IPO or acquisition, and founder secondary transactions have emerged as a key function of the trendy exit atmosphere.
“These offers present liquidity with out relinquishing management, providing a versatile answer for founders and buyers as firms proceed to stay non-public for longer.”
You’re not imagining it, IPOs are declining
One other exit technique that permits the proprietor to keep up management over the enterprise is an Preliminary Public Providing or IPO. To jog your reminiscence, IPOs contain taking a non-public firm public by issuing shares to the general public for the primary time.
2021 was an distinctive 12 months for the IPO market within the UK, each when it comes to the variety of firms itemizing and the quantity raised. However the present state of the market leaves a lot to be desired. As Charles Stanley information reveals, UK IPOs have reverted to traditionally low ranges.
Q1 2025 has solely seen 5 IPOs, elevating a mixed £74.7m in proceeds. Excessive-profile tech firms corresponding to Simply Eat and Sensible have additionally each shunned the UK market in latest months, with the previous transferring to Amsterdam and the latter to New York.
In Might, one of many London Inventory Alternate’s greatest underperformers Deliveroo, was bought by US rival DoorDash after it struggled to keep up profitability in outdated blighty.
That founders are more and more turning away from conventional exits corresponding to IPOs tells us that many are sensing the dangers outweigh the rewards in at this time’s economic system.
With public markets much less receptive, secondary transactions supply a compelling different for founders to enhance their money stream with out exposing themselves to market volatility.
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